Insurability – The Most Important Retirement Asset?
Through the middle half of the 20th century, Luce founded and successfully grew a family of magazines whose content was a major factor in shaping the thought and activity of American society.
Through the middle half of the 20th century, Luce founded and successfully grew a family of magazines whose content was a major factor in shaping the thought and activity of American society.
Back in the days before campaigning for public office became an ongoing, year-round activity, President Truman (or somebody like that) said, “Nobody pays any attention to the presidential election until the World Series is over!”
Even now, in much different times, the wisdom of the observation is not lost. Priorities divert our attention to the more pressing matters, leaving others to another day.
And as advisors working within a client’s calendar year, we know there is more success focusing a client’s attention on planning to save future taxes only after the concern for paying immediate taxes is out of the way, i.e., after April 15.
High-net-worth taxpayers – Wealthy clients have until January 1, to take advantage of an immediate estate tax savings of almost $3,000,000, or almost $7,000,000 over the next 20 years. But they must act before the tax law reduces the Federal gift and estate tax lifetime exemption by 50% at the end of the year.
Business owners – The recent Supreme Court case of Connelly v. United States could significantly increase the estate tax of business owners with an improperly structured buy-sell agreement. But in any case, the agreement they have probably hasn’t been reviewed recently. Or worse, they’ve done no buy-sell planning and your inquiry concerning Connelly might just get that process started. Connelly can be a door-opener to business transition planning.
Providers with dependents – Most clients are not sufficiently insuring their most important asset: their ability to convert their labor into wealth. Many don’t stop to think that their premature death would deny dependents their annual wage each year for what would have been every remaining working year. Often any coverage clients do have in force only represents a fraction of that loss.
If you are a bit rusty on the concepts and the details behind any or all of these marketing opportunities, have no fear! Available upon request are, 1) a concise cheat sheet covering the ins-and-outs of each planning initiative, 2) an on-demand presentation to you, as well as your clients and their advisors, on these subjects by either conference or Zoom call, and 3) an array of tailored marketing materials and services to help initiate and move forward each case.
Make your requests to Tom Virkler at either 706-614-3796 or tom@cpsadvancedmarkets.com to help assure a more profitable remaining 7-1/2 months of 2025.
For What It’s Worth: So, how much attention does baseball still draw since the days of Harry Truman (or somebody like that). In 2023 the Pew Research Center asked 12,000 U.S. adults, “If you had to choose one sport as being ‘America’s sport,’ even if you don’t personally follow it, which sport would it be?” Baseball scored a solid ground-rule double with 27% tipping their ball-caps to the National Pastime. But nothing came close to football, which received 53% of the nods among those surveyed.
There’s an old proverb somewhere that says if something can even be worse than anticipated, it probably will.
FAFSA has certain eligibility criteria that determine, based on your income and net worth, how much you should be contributing to your child’s higher education. If the amount they determine you can pay is too high it renders you ineligible for assistance.
A song familiar to all tells us that, “Love and marriage go together like a horse and carriage.” Maybe so. But when it comes to finances and marriage the use of the two as grist to the mill of so many matrimony jokes does not suggest such an harmonious coupling. Consider a couple tame examples:
Wife to husband: “I didn’t report your stolen credit card because the thief is using it more wisely than you did!”
Husband to wife: “I think I need to buy you a new bank account. The one you have keeps running out of money!”
Fortunately, fact usually looms larger than the fiction of humor. We find most high-net-worth married couples in full financial tandem, especially when it allows them to move large amounts of net worth out of their joint taxable estate and still keep access to the benefit of the assets after the transfer.
This is done through a common and time-tested planning device most-often referred to as the Spousal Lifetime Access Trust (SLAT).
So… a high-net-worth taxpayer can make full use of the current high lifetime exemption of $13,900,000 by transferring that amount to a SLAT for a spouse and still maintain vicarious access through that beneficiary spouse to the benefits of the property gifted.
A SLAT can also serve as the depository for life insurance outside the estate that can assist in payment of any unavoidable death taxes. In addition, legal counsel can be sought to see if a second trust can be used in a marriage to take similar advantage of the other lifetime exemption available to a married couple.
Call with additional questions or to arrange a conference or Zoom call on any planning topic with you and your clients, or their advisors, at Tom Virkler, 706-614-3796, or tom@cpsadvancedmarkets.com.
For What It’s Worth: Considered by many the wealthiest celebrity couple, and thus much in need of estate planning, are actress Salma Hayek and luxury goods CEO Francois-Henri Pinault. Married since 2009, the two share an estimated net worth of around $7.1 billion.
In one household a quiet and uneventful afternoon ended abruptly with this conversation:
Young son: “Hey, Mom. You know that valuable vase that’s been handed down in our family from generation to generation?”
Mother: “Yes, why?”
Son: “Well this generation just dropped it!”
Many high-net-worth clients have enough wealth to make large current gifts without affecting their current lifestyle. They anticipate leaving the full lifetime exemption amount to heirs at their passing but are tempted to make an untaxed $13,900,000 transfer before the exemption is reduced by 50% on January 1. The larger protected gift could easily save their estate more than $3,000,000 in death taxes down the road.
They don’t need the money, but still hesitate. So where’s the rub. In fact, there may be two rubs: affection and control. The assets transferred, often a family business, are labors of love which the donors want to continue to protect, at least during their lifetime. To follow the analogy, if the kids are gonna drop the valuable vase, they don’t want to see it happen.
A planning alternative that offers the best of both worlds, freeing assets from taxation while keeping control over them, is the Family Limited Liability Company (FLLC).
If an FLLC is a solution then its creation and implementation take time and an attorney, both of which will be in increasingly short supply as the New Year approaches.
Call with questions concerning your client’s FLLC planning or any taxation, business or estate issues that arise in your casework, to Tom Virkler at 706-614-3796 or tom@cpsadvancedmarkets.com.
For what it’s worth: When Gene Johnson lost her sister in 2010, it was left to Gene to clean out her London home where a vase was displayed on a shelf, a dusty souvenir from a trip to the Far East in the 1930s. Experts determined that the antique, now known as the Chinese Jiqingyouyu Reticulated Vase, was a product of the 18th century Qing Dynasty. Its last sale to a private buyer was two years later for $32,800,000.
The film only serves to fuel the suspicion we often have of those who seem too charitably minded; a suspicion that is understandably shared by insurance carriers.
A recent poll of over 3,000 undergraduate college students conducted by the American Council of Trustees and Alumni found most woefully ignorant of the basic elements of the U.S. Constitution. For example, only 28 % knew that the 13th Amendment ended slavery in the country. Worse, a recent nominee for the U.S. District Court was asked in the Senate hearing the purpose of Article II of the Constitution. The candidate was unable to answer correctly but, nonetheless, now sits on the bench.
Oh well. All that concerns us today concerning our founding document is Article I, Section 7, which begins, “All Bills for raising Revenue shall originate in the House of Representatives…”
Given all the inclusions and issues involved in a tax bill, and all the bargaining and trade-offs they create, the fate of high-exemption planning may be as uncertain as before.
Call to arrange a more full discussion of the additional advantages of this simple and straight-forward solution that addresses the uncertainty of the times. You may include your clients and their advisors, if needed.
Tom Virkler, JD
Director, CPS Advanced Markets
706.614.3796
tom@cpsadvancedmarkets.com
Life insurance is often used as security on a loan, usually in a business situation.